11:59 AM EDT, 09/13/2024 (MT Newswires) -- Upwork (UPWK) investor Engine Capital on Friday urged the freelancing marketplace to refresh its board and proposed other measures to boost shareholder value.

In a letter sent to Upwork's ( UPWK ) board, Engine Capital disclosed a roughly 3.5% stake in the company.

Upwork "has a great deal of potential that is unfortunately not being realized," Engine Capital founder and managing member Arnaud Ajdler wrote in the letter. "This is due to Upwork's ( UPWK ) lack of strategic clarity and focus, ineffective execution, poor capital allocation, and revolving management team under (Chief Executive) Hayden Brown."

Upwork's ( UPWK ) platform has "many functionality issues" despite spending more than $780 million on research and development since 2019, Ajdler said. "Too many freelancers and employers leave the platform because they get frustrated by its complexity," Ajdler added. "Ironically, many former Upwork employees told us they find Fiverr's ( FVRR ) experience more intuitive and straightforward."

Upwork didn't respond to MT Newswires' request for comment on the letter.

The company's shares were up 8.3% in Friday trading, but have fallen 32% so far this year. Last month, Upwork reported second-quarter adjusted earnings of $0.26 a share, up from $0.10 a year earlier, while revenue rose 15% to $193.1 million.

Ajdler said in the letter that Upwork's ( UPWK ) senior management team lacks stability. "Brown is now effectively on her third management team in four years," he wrote.

Upwork's ( UPWK ) board "should be refreshed and strengthened" through the addition of new independent directors, Ajdler wrote. "While we have the utmost respect for the successful venture capital investors currently serving on the board, their funds are no longer investors in Upwork and their representatives' lengthy tenures go against best practices."

Engine Capital called on Upwork's ( UPWK ) board to declassify itself to provide a chance to shareholders to elect directors on an annual basis. The board should immediately authorize and execute new share repurchases "while the stock remains deeply undervalued," Ajdler said.

The company has "a tremendous opportunity" to grow its enterprise business, he said. Upwork can "significantly improve" its cost structure by undertaking measures such as focusing on fewer initiatives and collapsing its enterprise and marketplace divisions, according to the letter.

"Upwork is now at a crossroads," Ajdler wrote. "The board needs to rapidly make important changes to give Upwork a chance at succeeding -- or the platform risks becoming increasingly irrelevant."

Price: 10.12, Change: +0.81, Percent Change: +8.65